What's up, WhatsApp? Google's beating plastic in India

For both Pichai and Facebook's Mark Zuckerberg, signing up merchants in cities, towns and villages will be critical.

Bloomberg|

Updated: Dec 20, 2017, 03.36 PM IST

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By Andy Mukherjee

Google CEO Sundar Pichai can count the early success of Tez, the online payment system he custom-built for India, as a promising start to a grueling fight.

The first click in online shopping is shifting away from search engines like Alphabet Inc.'s Google to e-commerce behemoth Amazon.com Inc. But Google isn't bowing out. Even with more product searches beginning within the Amazon app, Pichai can always help provide the last mile in commerce -- payment.

Whether it's splitting the cost of a meal, making a quick dash to the grocery store or ordering from a niche online boutique, the challenge in the region is often payment.

Customers and governments want to ditch cash: In China, many people have switched to smartphone apps Alipay and WeChat Pay. In Indonesia, Go-Jek, the country's biggest ride-hailing service, is swallowing not one but three local fintech companies to make Go-Pay ubiquitous. Singapore, meanwhile, is adopting a national QR code.

In India, the conversation about digital payments began in earnest after the government outlawed 86 percent of the currency in circulation. That shock, in November 2016, was a boon for wallet firms like Paytm, but also became the launch point for a newly built mobile payment interface connecting most of the country's banks.

Responding to an acute cash shortage, a panicky Indian government released its own payment app on the interface. But really, it's Google's Tez, unveiled in September, that's showing the true potential of the shared platform.

It allows people to exchange money between accounts held at any bank using nothing but a virtual payments address. Mobile apps that use the technology handled 77 million transactions in October, up from 31 million the previous month. Most of the growth is believed to be coming from Google's push: Only 10 percent of the business took place on BHIM, the government's app, in October, down from 45 percent in June.

Facebook Inc.'s response is worth watching. A WhatsApp payments feature, widely expected to be rolled out soon, could be situated within the chat function, already heavily used by 250 million Indians.

However, peer-to-peer payments won't be enough. For both Pichai and Facebook's Mark Zuckerberg, signing up merchants in cities, towns and villages will be critical. Already half a million merchants are using the Tez app, a Google executive told the Economic Times, even though the National Payments Corporation of India, the organization that manages the shared technology, is still fine-tuning features to boost acceptance at points of sale.

Mobile transactions have already surpassed commerce done via RuPay, the Indian version of Visa Inc.'s and Mastercard Inc.'s networks. But while RuPay handled $700 million at merchant establishments in October, the Visa/Mastercard franchise, including both credit and debt cards, cleared $13 billion.

If Google and Facebook succeed in demolishing this lucrative source of banks' revenue, they'll land themselves a template. Outside of China, payments are an open contest in Asia, and plastic looks beat.

(This column does not necessarily reflect the opinion of Bloomberg LP and its owners)